1. Field of the Invention
The present invention is related to resource and revenue management, and more particularly to a system and method of determining a value of a customer based on past activities of the customer.
2. Description of the Background Art
In many industries, providers of products and/or services fail to take into account indirect value that derives from the sale of the product or service, when determining a price for a particular customer or customer segment. Examples of such indirect value include advertising revenue, increased sales of related or unrelated goods or services, increased website traffic, increased revenue from related or unrelated business enterprises, and the like. Though such sources of indirect value can be quantified based on customer segment, demographic and/or psychographic categorization, observed or predicted behavior, and the like, existing revenue management systems fail to take into account such sources of indirect value in a systematic manner when determining whether or not to offer a resource to a particular customer or customer segment, or when determining a price point for offering such a resource to a particular customer or customer segment.
One example where such indirect value is a substantial component of overall profitability is the casino/hotel industry. Casinos and hotels are often affiliated with one another, and in many cases are operated by the same company. Most casino/hotel operators recognize that potential income from the casino often far exceeds income from renting rooms at the hotel; yet the hotel component of the business endeavor is a necessary element to attract customers. Thus, many such operators are content to make little or no profit (or even lose money) on their room prices in order to attract customers; the operators rely on increased casino profits from these customers to offset the discounted room prices. As a common enterprise, casino/hotel operators are primarily interested in maximizing total profits, and are willing to take a loss on the hotel operations in order to achieve a greater total profit.
In general, customers may be divided into segments having distinct characteristics and potential revenue or other value. For example, overnight visitors generate higher gaming revenues (i.e., provide greater gaming value) than do day trip visitors. A visitor on an overnight trip tends to do the largest share of his or her gaming at the casino associated with his or her hotel. Accordingly, casino/hotel operators whose hotel customers include those overnight visitors having the highest gaming value generally enjoy the highest casino revenues.
In many areas where gaming is prevalent, hotel rooms are scarce, and customers are often turned away. Casino/hotel operators try to determine how many rooms to rent at which price points, in an attempt to maximize revenue. Conventionally, room prices vary based on several factors, including class of room, special events, and availability. Operators forecast the number of rooms in demand at future dates, and set room prices based on these factors. Thus, for periods of high demand, higher room prices may be charged.
However, conventional techniques for setting room prices fail to take into account the potential gaming value of particular customer segments as compared with other customer segments. For example, higher-rated gaming players (i.e., those that belong to a customer segment associated with a higher level of casino profits) are more valuable to a casino/hotel operator than are lower-rated gaming players or non-players. Industry analysis has shown that 26% of casino customers provide 82% of gaming revenues. Thus, where accommodations are scarce, it would be advantageous for hotel/casino operators to favor higher-value customers over lower-value customers. Conventional room pricing methods fail to take into account the relative gaming value of customers.
Furthermore, many higher-rated gaming players book room reservations relatively late, within only a few days of their intended stay. If a hotel is already full by the time the higher-rated player wishes to book a room, the higher-rated player will be turned away. The result is that the room is occupied by a lower-valued customer (who booked earlier) instead of the higher-valued customer. A net loss in total revenues results, due to the failure to take into account the gaming value of each potential hotel customer when pricing or offering the room. Indeed, in some cases, it may be desirable not to rent the room to a lower-valued customer at all, and instead hold open the room for a possible later-booking higher valued customer.
In addition, current systems, both in the casino/hotel industry and in other industries fail to take into account total potential customer value, including indirect value, in determining whether or not to target a marketing campaign at a customer or customer segment, based on indirect value for the customer or customer segment, or on total value including direct and indirect value. As a result, services and/or goods are offered to potential customers without regard to a determined or estimated total value, including indirect value. As a result, such businesses suffer from misallocation of scarce resources, as well as a lack of optimization and profit maximization.
The profitability model varies at various casinos. For example, a casino in Lake Tahoe casino is usually full. Such a casino is more profitable than a casino with fewer customers and, therefore, needs to give fewer incentives for customers to attend. When determining a room rate, different casinos would categorize the same potential customer differently, depending on how much the casino wants to fill its rooms. For example, a casino that is mostly full would provide very few comps and would only comp potential customers who are highly profitable. In contrast, casinos that are less full would comp the highly profitable customers and, in addition, would comp additional, less profitable customers because, even though those customers are not as profitable, it is still desirable to fill more rooms.
In the past, resource management systems have not accounted for variations in properties when categorizing customers and/or setting room prices.
Certain gaming types are more lucrative than other types. For example, table games such as keno and blackjack are more profitable for a casino than slot machines. In the past, casinos have valued customers who spent $200 at the slot machines the same way that they have valued customers who spent $200 at table games. This valuation is not optimum, since the table game players make more money for the casinos and are to be encouraged to come to the casinos and play more than slot machine players.
In addition, certain casinos do not have all types of games. For example, many casinos on Indian reservations do not have table games. Thus, a customer who only plays table games would not be as valuable to this type of casino. It would be desirable to take differences in casinos into account when categorizing customers based on their past actions.